Hi TH
I am certainly not a trader looking for ‘undervalued’ stocks. That’s all about timing the market. On the occasions you get it right you realise a gain between ‘undervalued’ and ‘fair value’ and then what. In instances where you get it wrong, you get trapped for longer than anticipated, inducing all the human behaviours that undermine sound reasoning and discipline.
So everything I hold is based on a 3 to 5 year horizon. I look for Companies that have a long runway for growth, strategies in place to realise that growth and matching stats on early stage execution that confirm they are on track. In taking positions, I try build a position aimed at creating a safety margin. At one stage, I was besotted with free carry, the so called ultimate in risk mitigation. Now, only if I consider something really as high risk. So I build positions by averaging up opposed to averaging down, always maintaining a margin.
My portfolio is fairly concentrated (mainly tech) and my capital allocation is constantly under review. If the thesis is in tact, I will rarely exit a position. I do however trade within my portfolio effectively changing the weighting of a holding. Interestingly, if you look at 1 year graphs, the market presents many opportunities at times to add or reduce holdings which can be financially beneficial, particularly if you stay with the discipline of only averaging up. All backed up by very thorough financial analysis of course.
On a final note, not sure if you ever read Matt Jaos’ Article on Inflection points. Huge respect for Matt and his insights have really got me thinking about when to invest. Most momentum stocks will have several inflection points in their growth years and identifying these and building your holding accordingly seems to minimise those flat spots.
But as they say, each to their own and we never stop learning and adapting.
Rokewa
